While you were sleeping: Stocks extend slide
July 9 (BusinessDesk) - Wall Street slid for a second straight day from record highs as investors locked in profits
ahead of the minutes of the latest US Federal Reserve meeting scheduled for release on Wednesday to gauge the timing of
a rate increase.
Investors are also focused on the US second-quarter earnings season, unofficially kickstarted with Alcoa’s quarterly
results after the market close on Tuesday.
In late afternoon trading in New York, the Dow Jones Industrial Average shed 0.60 percent, the Standard & Poor’s 500 index gave up 0.62 percent, while the Nasdaq Composite Index dropped 1.25 percent.
The slide in the Dow was led by declines in shares of Verizon Communications and those of Boeing, down 1.8 percent and
1.6 percent respectively.
“There’s clearly some profit-taking in names that have done extremely well,” Peter Tuz, president of Chase Investment
Counsel in Charlottesville, Virginia, told Bloomberg News. “Some of the stocks have pretty lofty P/E [price-to-earnings]
ratios, so if anything does go awry with earnings or guidance, they could have bigger declines.”
The Chicago Board Options Exchange Volatility Index, also referred to as the investors,’ fear gauge, climbed 6.3 percent
to 12.04, after a 9.8 percent increase on Monday.
"It’s more that there are no reasons to buy rather than a lot of reasons to sell," Mark Luschini, chief investment
strategist at Janney Montgomery Scott in Philadelphia, told Reuters. "We’ve had such a move recently that buyers are
exhausted at a time when we were already due for a pullback."
In a sign that US interest rates might not be destined to move higher just yet, even as the June jobs data were stronger
than expected, Minneapolis Fed President Narayana Kocherlakota stressed the importance for policy makers to remain
accommodative to further help lower the unemployment rate.
“I currently see the probability of inflation’s averaging more than 2 percent over the next four years as being
considerably lower than the probability of inflation’s averaging less than 2 percent over the next four years,”
Kocherlakota said in a speech in Minneapolis. “And that’s why I conclude my discussion of inflation by saying that the
FOMC is undershooting its price stability goal."
“The current unemployment rate remains above most forecasts of its expected long-run level,” he said. “Personally, I
expect that, over the long run, the unemployment rate will converge to just over 5 percent. But I would say that this
measure could well overstate the degree of improvement in the US labour market.”
The US sold US$27 billion of three-year notes as the highest auction yield in more than three years drew investors.
In Europe, the Stoxx 600 Index sank 1.4 percent, as did Germany’s DAX and France’s CAC 40. The UK’s FTSE 100 dropped 1.3
percent.
Shares of Air France-KLM slumped 8.7 percent after the airline downgraded its full-year earnings forecast.
“While not representing a turning point in market trends, the June traffic figures published today as well as bookings
for July and August nevertheless reflect the over-capacity on certain long-haul routes, notably North America and Asia,
with the attendant impact on yields,” the company said in a statement.
“This comes on top of the persistently weak cargo demand and the challenging situation in Venezuela identified in the
first quarter.”
(BusinessDesk)